Why Are Oil Companies Investing Millions In This Old-School Infrastructure?

Due to a wealth of crude oil coming up in Alberta, Canada, and Bakken, North Dakota, oil and natural gas companies are investing hundreds of millions of dollars in rail projects to get the oil flowing as soon as possible.

What’s special about the oil?

While more than half the world’s oil averaged $110.13 a barrel in the fourth quarter on the New York Mercantile Exchange, and the West Texas Intermediate benchmark grade averaged $88.23 a barrel, Canada’s Western Canada Select benchmark showed $61.23 per barrel of oil-sands crude. In December, the Western Canada Select value was at a record discount to the West Texas Intermediate, with as much as a $42.50 gap between the two.

The oil in Alberta and Bakken is bountiful — almost too bountiful — as there is a bottleneck in the distribution of that oil, which is part of the reason the price is so low. Since the oil coming out of those regions is at such a high discount, refineries are taking measures to get their hands on it quickly, and since pipelines take time to build, many are investing in the rails…